Flash v. Conn - 109 U.S. 371 (1883)
U.S. Supreme Court
Flash v. Conn, 109 U.S. 371 (1883)
Flash v. Conn
Argued November 13, 1883
Decided November 20, 1883
109 U.S. 371
1. The liability created by a provision in a general act of the New York for the formation of corporations, that all the stockholders of every company incorporated under it shall be severally individually liable to creditors of the company until the whole amount of the capital stock shall be paid in and certified, is in contract, and not a penalty, and can be enforced by an action sounding in contract against a stockholder found in another state.
2. The courts of New York having held that a liability of a stockholder to creditors arising under one of its general statutes for forming corporations was in contract, when the attempt was made to enforce it in New York, this Court follows that interpretation in a suit to enforce such a liability in another state.
3. The liability of a stockholder to a creditor under the 10th section of the general act of the New York for forming corporations for manufacturing purposes is a liability in contract, which may be enforced by an action at law. It is not necessary to resort to equity.
The plaintiffs in error, who were the plaintiffs below, brought this suit in the Circuit Court of Escambia County, in the State of Florida, on January 27, 1876. It was afterwards, on the petition of defendant, removed to the Circuit Court of the United States for the Northern District of Florida.
The declaration alleged that the defendant, on or before
April 1, 1874, was a stockholder in the Pensacola Lumber Company, a corporation organized in the State of New York under the provisions of an act of the legislature of the state, passed February 17, 1848, entitled "An act to authorize the formation of corporations for manufacturing, mining, etc., purposes," and various amendments thereof; that the defendant was the holder of $75,000 of the stock of said company, the entire stock being $300,000; that the company carried on business, and had an office and an agent, in said County of Escambia, State of Florida; that the company, while the defendant was the holder of the stock aforesaid, became largely indebted to the plaintiffs, which indebtedness was evidenced by two promissory notes, one for $5,000, dated September 11, 1864, and one for $5,946.20, of like date, and an account stated for $2,646.47; that the plaintiffs, on February 16, 1875, instituted their suit in the Circuit Court of said Escambia County against the said company to recover the amount due on said notes and account, and on March 15, 1875, judgment was rendered by said court in favor of plaintiffs, for the sum of $14,120.50 and costs; that the company having been adjudged bankrupt by the United States District Court for the Southern District of New York in the year 1875, its property could not be taken in execution to satisfy said judgment, nevertheless an execution was issued thereon and returned wholly unsatisfied; that the property of the company had been sold by order of the bankrupt court, and its proceeds would not more than pay the costs of the bankrupt proceedings, leaving nothing to be applied to the payment of said judgment or claims of other creditors against the company; that by the provisions of the act under which the company was organized, all the stockholders were severally individually liable to the creditors of the company to an amount equal to the amount of stock held by them respectively for all debts and contracts made by such company until the whole amount of capital stock fixed and limited by such company should have been paid in, and a certificate thereof made, signed, and sworn to by the president of said company and a majority of its trustees, and recorded in the office of the clerk of the county
where the business of the company was carried on. It is averred that the company failed to comply with the said provisions of the act, and did not, by its president and a majority of its trustees, make, sign, swear to, and record said certificate, either in the County of New York, the county in which the operations of said company were by its articles to be carried on, or in the said County of Escambia, in which the company carried on business, or in anywise as required by the act so as to exempt the defendant from his individual liability. Wherefore, the declaration alleged, the defendant became liable to the plaintiffs for the said debt and contract made by the company, and the plaintiffs claimed $28,000.
The defendant filed six pleas, to some of which the plaintiffs demurred and to others filed replications. The defendant filed a rejoinder to one of the replications, to which the plaintiffs demurred. The cause was heard upon the several demurrers, and the court rendered the following judgment:
"This cause came on to be heard upon the plaintiffs' demurrers to defendant's first, second, fifth, and sixth pleas, and to defendant's rejoinder to plaintiffs' replication to defendant's third plea, and the court having determined that the plaintiffs' declaration is insufficient in law, it is therefore considered by the court that plaintiffs take nothing by their said suit."
From this judgment this writ of error is prosecuted.